Emerging-Market Selloff Fades on Oil Rebound, European Growth

  • Currencies rise from one-week low, led by Russia's ruble
  • Equity benchmark posts biggest weekly decline in a month

A selloff in emerging-market assets eased as a rebound in oil prices and data showing the euro-area’s economy expanded at the end of 2015 helped offset concern that central banks won’t be able to stem a slowdown in global growth.

The Colombian peso and Russia’s ruble led currencies higher as a Bloomberg gauge of developing-nation exchange rates rose from a one-week low. Shares in emerging Europe and Africa rallied, offsetting declines in Asia. The MSCI Emerging Europe, Middle East and Africa Index advanced 1.2 percent, led by Naspers Ltd. in Johannesburg. Polish equities climbed for the first time this week. Chinese shares traded in Hong Kong slumped to the lowest in almost seven years as markets across Asia retreated, following a decline in world equities into a bear market on Thursday.

The MSCI Emerging Markets Index slipped 0.2 percent to 711.24, following a 2.4 percent drop Thursday that was the biggest in three weeks. The selloff that dragged the benchmark down 3.8 percent this week faded as crude oil surged the most in seven years on signs OPEC is willing to engage with other producers, and data showed the euro-area economy grew at the end of 2015. Sentiment toward riskier assets had soured on skepticism that central banks can arrest the slide in the world economy, while Federal Reserve Chair Janet Yellen indicated the U.S. won’t rush to raise interest rates again.

“Gains in commodity prices and decent data from the euro-area are helping create more appetite for risk in emerging Europe,” said Michael Wang, a strategist at hedge fund Amiya Capital in London, who thinks Indian, Indonesian and Mexican stocks are attractive. “I’m not so sure sentiment will hold given that Yellen didn’t really provide many clues that the Fed will provide policy support any time soon.”

Weekly Decline

The Bloomberg currency gauge increased 0.3 percent. The premium investors demand to own emerging-country debt over U.S. Treasuries narrowed 14 basis points to 493 from widest spread since 2009, according to JPMorgan Chase & Co. indexes.

The MSCI stock measure posted its steepest weekly loss since the period ended Jan. 15. Six of the gauge’s 10 industry groups declined on Friday, led by health-care and industrial stocks. Energy companies ended a five-day selloff, advancing 0.9 percent.

The equity benchmark has fallen 10 percent this year, pushing the average valuation of its members to 10.5 times estimated 12-month earnings, compared with a multiple of 14.3 for the MSCI World Index, which is down 11 percent in 2016.

Asia Slump

Declines Friday were steered by Asia, where South Korea’s Kospi Index posted its biggest weekly drop since August. The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong fell to lowest since March 2009. Markets in mainland China, Taiwan and Vietnam remain closed for Lunar New Year holidays.

South Africa’s FTSE/JSE Africa All Share Index added 2.5 percent as Naspers climbed 2.8 percent. The Micex Index gained 0.8 percent, supported by the rebound in crude, Russia’s biggest export. Stock indexes in Hungary and Poland advanced at least 0.3 percent. Brazil’s Ibovespa benchmark rose 1.3 percent, rebounding from a three-day slump.

Bloomberg’s index of 20 developing-nation retreated 0.4 percent this week, bringing the decline in 2016 to 1.3 percent.

Russia’s ruble strengthened 1.6 percent. The exchange rate’s three-month implied volatility has soared to the highest level since May as it tracked swings in oil prices. Central bank First Deputy Governor Dmitry Tulin said policy makers may act to counter currency volatility that’s a result of market “imperfections.” The Colombian peso gained 1.7 percent.

Hungarian bonds were the best performers in emerging Europe, with yields on 10-year debt falling 11 basis points to 3.42 percent. Similar-maturity bonds in Poland yielded 3.07 percent, capping a six basis-point weekly decline.

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